Finding 1130935 (2022-013)

FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD NUMBER: SLFRP4587 FEDERAL AWARD YEAR: 2022 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Costs Principles; Procurement and Suspension and Debarment; Reporting; and Subrecipient Monitoring QUESTIONED COSTS: -$0- Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Washington County has deficiencies in procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Costs Principles; Procurement and Suspension and Debarment; Reporting; and Subrecipient Monitoring. • Expenditures are not reviewed for Activities Allowed or Unallowed and Allowable Costs/Costs Principles. • The Interim and Project and Expenditure reports are not approved by the BOCC prior to submission. • Additionally, the contract with a subrecipient was not renewed annually, nor was the full contract amount encumbered at the time the contract was initiated. • The County has not established Subrecipient Monitoring Procedures. o The County did not enforce the reporting requirements as set out in the Subrecipient Agreement. The subrecipient submitted quarterly reports for Quarter 1 and Quarter 2 to the BOCC on August 8, 2022. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal program expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition attributed to the noncompliance with grant requirements and could lead to the loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of requirements for this program and implement internal control procedures to ensure compliance with all requirements. Management Response: District 1 County Commissioner: Not by way of excuse, but truly in response, the Federal programs associated with the COVID response were unnecessarily arduous and created confusion at all levels of government. While the monetary response was accepted, the premise of these programs was nothing more than an administrative shell game. From the outset of the response, guidance was termed as “interim”, then “final Interim” and finally, “final” (redundancy intentional). The intent of our national level leadership became more apparent as these programs progressed with each iteration of programming being reliant on returned funds from the previous. Without grandstanding, I will simply say that no entity, regardless of their planning with these programs, will be found as fully compliant. As these programs have a sunset in the near term, I suspect these findings will disappear. District 2 County Commissioner: I was not in office the year audited, but I will work with the other elected officials to Implement a system of internal controls to ensure compliance with grant requirements. District 3 County Commissioner: The elected officials will establish sub-recipient monitoring procedures to remain compliant with all requirements for this type of program. Criteria: 2 CFR § 200.303(a) Internal Controls reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The GAO Standards – Section 1 – Fundamental Concepts of Internal Control – OV1.01 states in part: Definition of Internal Control Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. Additionally, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.04 states in part: Components, Principles, and Attributes Control Activities – The actions management establishes through policies and procedures to achieve objectives and respond to risks in the internal control system, which includes the entity’s information system.